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Blyvooruitzicht
Blyvooruitzicht Gold Mining Company Limited (“Blyvoor”) is situated in the Carletonville goldfields on the north western edge of the Witwatersrand Basin. Blyvoor was established in 1937 and gold production began in 1942. It was the first mine in the “West Wits” line and acquired the Doornfontein mine as a wholly-owned subsidiary in December 1995.

The Blyvoor section has two main gold-bearing horizons, the Carbon Leader Reef, which is one of the principle orebodies in the goldfield, and the Middelvlei Reef, which is situated 75 metres above the Carbon Leader Reef horizon. Blyvoor also mines surface rock dumps. Production from surface sources will progressively reduce in favour of underground ore to 100 000 tons per month to match the plant capacity of approximately 200 000 tons per month.

The Blyvoor expansion project was implemented to realise the full potential of the Blyvoor ore reserves and introduced the mining of the lower grade Middelvlei Reef resources as well as the reclamation of “old gold” in worked out areas. Low cost mining of the Middelvlei Reef, situated in a de-stressed environment due to extensive mining of Carbon Leader Reef, is achievable because of the substantial pre-development carried out. The expansion project has increased the current life of mine plan in excess of 15 years.

Gold production for the year was marginally down from 7.87 tonnes the previous financial year to 7.70 tonnes (253 025 to 247 626 ounces). The mine employs approximately 5 800 employees (including contractors).

North West Operations
The Buffelsfontein and Hartebeestfontein mining operations have been restructured and now fall under a single management structure known as the North West Operations. These are situated in the Klerksdorp goldfield region of the Witwatersrand Basin, exploiting the Vaal River gold-bearing horizon. Buffels started production in 1954, while production at Harties began a year later.

Since the inception of the original Buffels and Harties mines, more than 2 262 tonnes (72.7 million ounces) of gold have been produced. During the year, the North West Operations produced 14.39 tonnes (462 743 ounces) of gold, 11.95 tonnes (384 296 ounces) from underground operations and 2.44 tonnes (78 447 ounces) from surface rock dump reclamation and the open pit.

During the Strategic Plan Overview of 2001/02, a decision was made to mine previously unpaid areas below a cut-off grade of 6.8 grams per tonne, provided that a financial contribution could be realised. These areas are called the “medium grades” and carry no overhead costs. The build up to full production was slower than expected, mainly due to infrastructural constraints. The expected life of mine of the operation is 15 years. The operation provides employment to 12 900 people (including contractors).

Tolukuma
The Tolukuma mine is situated about 100 kilometres north of Port Moresby in Papua New Guinea, at an elevation of 1 550 metres. It was purchased by Dome Resources from Newmont in 1993, and acquired by DRD in the first half of 2000, the company’s objective being to re-engineer and further develop the operation.

Open pit production at the mine began in 1995 and underground production in mid-1997.

The Tolukuma deposit is an epithermal low sulphidation quartz vein system notable for its high-grade “bonanza” style mineralisation. Quartz veins average one to two metres in width over a strike length of more than one kilometre.

Total production for the year amounted to 2.12 tonnes (68 096 ounces) of gold and 4.91 tonnes (157 844 ounces) of silver. The workforce comprises 472 employees (including contractors).

Crown
The Crown surface operation is involved in the clearing of old slime and sand dumps and the environmental clean-up of land across Central Johannesburg. It has produced approximately 67 tonnes (2.2 million ounces) of gold since inception. Crown has three operating plants – Crown Mines, City Deep and Knights – with an installed capacity to treat 13 million tonnes of sand and tailings.

Gold production was 4.39 tons (141 238 ounces) during the year. The operation has six years of life and employs 757 people (including contractors). In an empowerment transaction, DRD sold 60% of Crown to Khumo Bathong Holdings (Pty) Ltd (“KBH”) with effect from July 1, 2002 for an amount of R105.5 million. DRD has entered into an agreement with KBH to manage the operations for the next year.

ERPM
Crown Gold Recoveries (Pty) Limited (“CGR”) acquired the East Rand Proprietary Mines Limited (“ERPM”) on November 21, 2002. ERPM is a 100-year-old underground mining operation on the Witwatersrand Basin at Boksburg, to the east of Johannesburg. It is intended to increase production, lower costs and extend the mine's life to 11 years.

Gold production from November 1, 2002 to June 30, 2003 amounted to 1.61 tons (51 858 ounces). The mine employs approximately 3 300 employees (including contractors).

Capital expenditure
In total, R121.5 million was spent on capital projects compared to R83.1 million spent the previous financial year. Blyvoor expenditure amounted to R37.8 million was spent on the No 6 Shaft main reef development, the No 5 Shaft cooling system, pumping and the overland conveyor.

At the North West Operations R57.7 million was spent mainly on the medium grade project and new mining equipment. Expenditure on the opening up of mining areas amounted to R9.2 million, with R7.7 million spent on the mid-shaft loading system at No 5 Shaft. Capital expenditure on the mining of the Gold Estate open pit amounted to R6.3 million.

At Tolukuma R24.4 million was spent – R12.7 million on mining equipment and R11.7 million on exploration.

Projects and expenditure planned for the new financial year include:

1.	opening up ore reserves at North West and Blyvoor;
2.	the No 4 and 5 slimes dam project at Blyvoor;
3.	the Milaihamba Project at Tolukuma; and
4.	the mobile plant and equipment at Tolukuma.

Revenue
A substantial portion of our revenue is derived from the sale of gold and related by-products. As a result, our operating results are directly related to the price of gold.

The gold price in US dollars received has increased from an average US$253 per ounce the previous financial year to an average of US$336 per ounce this fiscal year. However, the rand appreciated against the US dollar from R10.37 as at June 30, 2002 to R7.47 as at June 30, 2003. The average rand per kilogram price received increased from R82 580 the previous fiscal to R97 652 this financial year.

Revenue for the year ended June 30, 2003 decreased by 8.7% to R2 408.6 million from R2 639.0 million in fiscal 2002. The reduction was mainly attributable to the sale of CGR and the lower gold production.

Cost of sales
Cash costs typically make up more than 94% of our total production costs. The balance of costs consist of depreciation of mining assets, provision for rehabilitation and changes in gold inventory.

The following table sets out our total cash cost per kilogram of gold produced by operation:


	2003	2002
	R/kg	R/kg
North West Operations
Surface operations	73 002	51 097
Underground operations	97 511	76 232
Weighted average	93 356	71 411
Blyvoor Operations
Surface operations	68 752	52 021
Underground operations	78 603	62 214
Weighted average	76 828	60 085
West Wits	97 439	86 165
Tolukuma	84 733	78 332
Total DRD
Surface operations	74 619	55 903
Underground operations	90 945	72 487
Weighted	88 112	69 133
CGR	74 793	66 505
ERPM	126 152	na

Most of our cash costs are incurred in rands. Our unit cash cost increased by 27.5% to R88 112 per kilogram (US$303 per ounce).

Depreciation

Depreciation charges were R105.7 million for the financial year compared to R135.1 million the previous year. The decrease is mainly due to the sale of CGR.

Retrenchment costs

Employment termination costs increased to R13.6 million this year compared to R3.9 million the previous financial year. The increase is mainly due to the restructuring of the North West Operations.

Provision for rehabilitation

A total of R133.7 million was invested in our various environmental trust funds as at June 30, 2003. Provision for rehabilitation increased by R5.2 million in the previous financial year compared to R12.8 million this financial year. The increase was primarily attributable to the rehabilitation of the open pit areas at the North West Operations.

Financial instruments

The profit on financial instruments for the financial year ended June 30, 2003 was R370.2 million, as compared to a loss of R837.0 million for the financial year ended June 30, 2002.

The group adopted AC133 Financial Instruments: Recognition and Measurement in respect of financial instruments. A net adjustment of R582.0 million was made to opening shareholders’ equity, comprising an adjustment of R249.4 million to the deferred tax opening balance, and R831.4 million to the opening balance of derivative financial liabilities to account for the impact of the group's derivative financial instruments at the beginning of the year (refer to Note 18).

The substantial appreciation of the rand during fiscal 2003 resulted in a reduction in the fair value liability of our Eskom gold for electricity contract, resulting in an increase in the profit on financial instruments. This increase was offset by the decrease in the fair value of our call positions and interest rate swap agreement (refer to Note 18 of the Annual Financial Statements for more information on these positions).

During fiscal 2002 the group closed out various hedge positions, resulting in a realised loss of R837.0 million for that year.

Asset impairment and diminution in investments

During the financial year ended June 30, 2003, we recorded an impairment charge of R133.0 million. This amount related to the write-off of the open pit operations at the North West Operations of R11.9 million, the impairment of the No 6 Shaft at the North West Operations of R35.5 million (impaired, as a result of the 60-day review of these operations and management’s decision to ‘mothball’ certain infrastructure) and the Duff Scott Hospital assets of R0.6 million. Due to the prevailing low rand gold price the group has also impaired in full certain loans to Crown Gold Recoveries (Pty) Limited amounting to R85.0 million.

During fiscal 2002 the group recorded an impairment charge against the residential property at the Durban Deep Section of R21.9 million.

Administration and general costs

The administration and general charges decreased in the financial year to R61.1 million compared to R125.0 million in the previous financial year. The decrease was primarily due to the concerted effort from management to institute tighter financial controls, including greater reliance on in-house expertise as opposed to external consultants.

Investment income

The increase to R100.0 million in the financial year ended June 30, 2003 from R55.7 million in the financial year ended June 30, 2002 was mainly due to the increase in interest received from call deposits on the proceeds of the convertible loan notes issue in November 2002. The substantial appreciation of the rand in fiscal 2003 also resulted in an increase in unrealised foreign exchange gains.

Finance costs

Finance and interest expenses amounted to R39.5 million for the financial year ended June 30, 2003 compared to R24.2 million in the financial year ended June 30, 2002. The increase is attributable to the interest incurred on the convertible loan notes issue in November 2002.

Income and mining tax

In the financial year ended June 30, 2003 the tax charge was 0.9% of our consolidated income compared to a benefit of 26.2% of our consolidated loss in the financial year ended June 30, 2002.

The increased profitability for the year under review resulted in a decrease in assessed losses available to the group, resulting in a deferred tax charge for the period of R111.9 million. Losses incurred in the financial year ended June 30, 2002 resulted in a deferred tax benefit of R181.6 million for the fiscal 2002 year. The group’s share of the taxation of its associate company was R0.2 million for the 2003 financial year.

The taxation charge for the financial year ended June 30, 2003 was reduced by a change in the rate of deferred tax. During the year the company changed the rates at which deferred tax is recognised from 30% in the financial year ended June 30, 2002 to the mining tax rate applicable to the group’s individual mining operations, at either 37% or 46% (refer to Note 6 of the Annual Financial Statements) for the financial year ended June 30, 2003. This change in rates resulted in an increase in the deferred tax asset, and hence a decrease in the taxation charge for the period of R108.9 million.